Every morning the market presents you with a gap — the difference between yesterday's close and today's open. Most traders acknowledge the gap exists but treat them interchangeably. That single habit undermines opening range work before you draw your first line.
Gap classification is not academic. The type of gap you face should change where you place your opening range, whether you expect a fill, and how aggressively you trade the first breakout.
Common gaps
Common gaps appear in sideways markets with no significant news. They are typically small relative to the stock's average true range — often less than half the 14-day ATR — and they tend to fill within the first two hours of the session.
At the open, a common gap suggests your opening range should be tight. Expect price to revisit the prior close. Breakout trades in the direction of the gap carry lower conviction unless volume expands dramatically in the first five minutes.
Breakaway gaps
Breakaway gaps occur at the end of a consolidation pattern, usually on elevated volume and with a clear catalyst — earnings, a regulatory decision, or a sector-wide move. They are larger, often exceeding the full ATR, and they frequently do not fill on day one.
When you identify a breakaway gap, widen your opening range expectations. The prior day's range is less relevant. Your bias should align with the gap direction unless the first 15 minutes show immediate rejection with volume.
Runaway gaps
Runaway gaps appear mid-trend, signalling continuation rather than reversal. They are the gaps traders most often fade incorrectly. If a stock has been trending for several sessions and gaps again in the trend direction on moderate-to-high volume, treat it as continuation.
Your opening range on a runaway gap day should respect the trend. Look for shallow pullbacks to the gap zone rather than full fills. Entries on retests of the opening range boundary in the trend direction tend to outperform counter-trend fades.
Exhaustion gaps
Exhaustion gaps appear near the end of extended moves, often on climactic volume. The gap direction matches the prior trend, but the move is running out of participants. These gaps frequently fill quickly and reverse.
Identifying exhaustion gaps requires context: how many days has the trend run, is volume expanding or contracting, and is there a visible divergence on shorter timeframes? If you suspect exhaustion, keep your opening range lines close and be prepared for a failed breakout within the first 30 minutes.
Putting it together
Before you mark your opening range each morning, spend two minutes classifying the gap. Write it down — literally, on paper or in a log. Over a month you will notice patterns in how each type behaves on your specific watchlist.
If you want guided practice with live examples, our Gap Analysis Masterclass walks through 40+ recent charts with classification exercises.